South African Budget Summary 2017/18

Yesterday Minister of Finance for South Africa, Pravin Gordhan delivered his annual Budget Speech, focusing on the 2017/18 year ahead.

In his address, he spoke of Government’s plan for growing a stronger economy and having a budget that can thrive and deliver to the country’s citizens over the long term.

Expected economic growth this year is set to improve to 1.3%, up from last year’s 0.5% and to grow even further for the 2019 year to 2.2%.  The budget aims to reduce spending by R10 billon for this year and by R16 billion next year.

For Government to support service delivery it will need to improve the quality of its spending and Minister Gordhan also called on citizens to hold their leaders accountable and call out corruption, waste of public services and maladministration.

Let’s have a look at the main changes for the 2017/18 year.

INCOME TAX: INDIVIDUALS & TRUSTS

The tax threshold (for those under 65 years old) has increased slightly to R75 750 p/a.

Individuals & Special Trusts

Taxable Income (R) Rate of Tax (R)
0 – 189 880 18% of taxable income
189 881 – 296 540 34 178 + 26% of taxable income above 189 880
296 541 – 410 460 61 910 + 31% of taxable income above 296 540
410 461 – 555 600 97 225 + 39% of taxable income above 410 460
555 601 – 708 310 149 475 + 41% of taxable income above 555 600
708 311 – 1 500 000 209 032 + 41% of taxable income above 708 310
1 500 001 and above 533 625 +45% of taxable income above 1 500 000

Trusts other than Special Trusts

Rates of 45%

INCOME TAX: COMPANIES, SMALL BUSINESS CORPORATIONS & MICRO BUSINESSES

Financial years ending on any date between 1 April 2017 and 31 March 2018.

Companies

Type Rate of Tax (R)
Companies 28% of taxable income

Small Business Corporations

Taxable Income (R) Rate of Tax (R)
0 – 75 750 0% of taxable income
75 751 – 365 000 7% of taxable income above 75 750
365 001 – 550 000 20 248 + 21% of taxable income above 365 000
550 001 and above 59 098 +28% of taxable income above 550 000

Micro Businesses

Taxable turnover (R) Rate of Tax (R)
0 – 335 000 0% of taxable turnover
335 001 – 550 000 1% of taxable turnover above 335 000
550 001 – 750 000 1 650 + 2% of taxable turnover above 500 000
750 001 and above 6650 +3% of taxable turnover above 750 000

CAPITAL GAINS TAX

Capital gains tax rates have increased for this year to, with individuals and special trusts rising from 16.4% to 18%.  Companies remain the same at 22.4% however Other Trusts rise to 36%.

DIVIDENDS TAX

Dividends Tax is a final tax at a rate up from last year’s 15% to this year’s 20% on dividends paid by resident and Non Resident companies in respect of shares listed on the JSE.

WITHHOLDING TAX (IN RESPECT OF THE DISPOSAL OF IMMOVABLE PROPERTY)

This provisional tax is withheld on behalf of Non Resident sellers of immovable property in South Africa to be set off the against the normal tax liability of the Non Residents.

Non Resident Individual Withholding Tax rises to 7.5% from the previous 5%, Non Resident Companies are now at 10% and Non Resident Trusts at 15%.

VAT

While there was speculation that Minister Gordhan was planning on an increase in VAT, it will be staying the same at 14%.

FUEL LEVIES

The two taxes relating to fuel and travel, namely the Fuel Levy and the Road Accident Fund, will both increase.  The Fuel Levy increases by 30c per litre while the Road Accident Levy increases by 9c per litre.

SIN TAXES

Those “sins” that so many enjoy will be costing you more for this year with increases across the board for alcohol and tobacco products.

HEALTH PROMOTION LEVY

Announced last year, the new Sugar Tax will be implemented soon with the rate being 2.1c per gram for sugar content above 4g per 100ml in beverages.

ESTATE DUTY

No changes have been made to Estate Duty which remains at 20% on property of residents and South African property of Non Residents.

DONATIONS TAX

As with Estate Duty, Donations Tax has not been changed and is still levied at 20% of the property sold.

TRANSFER DUTY

Lastly but my no means least, is the changes to Transfer Duty.  The biggest change is the exemption of R750 000 has been increased to R900 000. Meaning that you will only start to pay Transfer Duty for properties over the R900 000 mark.

While percentages have remained the same there has been a small reduction in the set fees which the percentage is then added to.

Acquisition of property by all persons:

Value of Property (R) Rate
0 – 900 000 0%
900 001 – 1 250 000 3% of the value above 900 000
1 250 001 – 1 750 000 10 500 + 6% of the value above 1 250 000
1 750 001 – 2 250 000 40 500 + 8% of the value above 1 750 000
2 250 001 – 10 000 000 80 500 + 11% of the value above 2 250 000
10 000 001 and above 933 000 + 13% of the value above 10 000 000

The best news from this budget has definitely been the increase of the exemption for Transfer Duty, and will be a welcome relief for those first time property buyers, making it a little bit cheaper to purchase a property.

For further info and a more detailed budget breakdown you can click here.